Study says oil, gas amendment won't hurt state's economy

Gargi Chakrabarty

Published October 11, 2008 at 12:05 a.m.
Updated October 11, 2008 at 12:33 a.m.

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Tax hikes on the oil and gas industry don't drive away investment or stunt the creation of jobs, according to a study released Wednesday by a nonprofit consulting firm.

The study by Bozeman, Mont.-based Headwaters Economics bolsters Gov. Bill Ritter's support for Amendment 58 and rebuts threats by Colorado's oil and gas industry, which opposes the ballot measure.

Amendment 58 seeks to raise an additional $320 million each year in severance tax revenues from the state's booming oil and gas industry by eliminating an existing ad valorem tax credit.

The bulk of the money would fund college scholarships, with smaller portions going to renewable energy, environment and conservation.

"We haven't taken a position on Amendment 58, but our study shows no evidence that taxes scare away industry," said Mark Haggerty who authored the study titled Energy Revenue in the InterMountain West.

"The oil and gas industry is dependent on natural resources, and it can't just pick up and move to another state if they don't like the tax policy of the state which has the natural resource."

Haggerty said Alaska raised taxes on the oil and gas industry under Gov. Sarah Palin, but investment dollars are not bypassing the state.

Similarly, the Canadian province of Alberta raised royalty rates last October. Royalties would increase by $1.4 billion in 2010, 20 percent more than the current projection for that year. The hike will take effect beginning 2009.

Since state taxes can be deducted from federal taxable income, increasing those taxes really mean shifting tax revenues to the state government from the federal government with little impact on the companies, Haggerty said.

Haggerty said the study was partly funded by charitable groups, but he didn't say which ones contributed or how much the study cost.

Dan Hopkins, spokesman of Coloradans for a Stable Economy - the energy industry-backed campaign fighting Amendment 58, said "contrary to what the study suggests, raising severance tax would discourage growth - as the National Union of Taxpayers has said."

An open letter from NTU signed by 90 economists released Sept. 30 warned that Amendment 58 would "have the effect of raising energy prices on consumers and discouraging growth in Colorado's economy."

Hopkins criticized the Headwaters Economics study, which concluded that Colorado's total tax burden on the oil and gas industry at 6.2 percent was the lowest in the region, compared to Wyoming's 15.9 percent and New Mexico's 15 percent.

"That's a horrible reason to raise tax," he said. "If you use that rational, then every one of those states have higher sales tax. Does that mean we in Colorado should have a higher sales tax too to match our neighbors?"

Tax collections

A study released this week concluded that Colorado collects the lowest tax from the oil and gas industry compared to neighboring states.

* Wyoming: 15.9 percent

* New Mexico: 15.0 percent

* Utah: 12.1 percent

* Montana: 9.8 percent

* Colorado: 6.2 percent

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